Rs 73,000 Cr Worth Unsold Cars In India Pose Threat To Dealers

India's stockpile of unsold cars reached an unprecedented level of over seven lakh units, reported The Federation of Automobile Dealers Association (FADA). The unsold passenger vehicles are valued at approximately Rs 73,000 crore.

The rise in passenger vehicle inventory at dealerships across the country is due to a slowdown in sales and is a risk to dealer sustainability.

The duration of vehicle stockpiles at dealerships has also witnessed a significant increase. The inventory holding period went up from 65-67 days in early July to 70-75 days now, FADA said. The potential outcomes of this extended period may force dealer failures.

As such, FADA President Manish Raj Singhania urged passenger vehicle Original Equipment Manufacturers (OEMs) to adjust production to match retail figures. Although a long-term process, Singhania suggested a reduced vehicle supply to dealers and recommended a gap of 50,000 to 70,000 units between retail and wholesale figures.

According to the FADA President, a 30-day inventory period with a minor excess of about a week would be ideal for automobile dealerships. Automakers could try lowering their dispatches in the coming months and increase them around end of September and early October, he suggested. This could help in managing the present high levels of inventory at dealerships around the nation.

Passenger vehicle sales in July saw an upturn of 10 per cent reaching 3,20,129 units despite an overall slowdown, FADA data showed. However, wholesales of passenger vehicles for the same month witnessed a dip of 2.5 per cent on year at 3.41 lakh units, due to the high base effect of last year.

FADA President Singhania has urged manufacturers to support dealers by bringing schemes and bearing the additional interest cost for more days of stock-keeping. He called for dealer sustainability saying that if brands are genuinely interested, they need to work with dealers and keep them healthy.

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